What is the free-rider problem, and how is it related to public goods?
What will be an ideal response?
The free-rider problem arises from the exclusion principle. Since no one can be excluded from the benefits of a public good, even if they don't contribute towards paying for the good, people have an incentive to let other people pay for the good and to not contribute themselves. If everyone free rides, the good will not get produced. Hence, public goods usually are provided by the government and paid for by taxes.
You might also like to view...
If the agent has more information than the principal and there is only one state of nature, then
A) efficiency in both production and risk-bearing can be achieved. B) only efficiency in production can be achieved. C) only efficiency in risk-bearing can be achieved. D) neither efficiency in production nor efficiency in risk-bearing can be achieved.
"Only in a progressive tax system does the amount of taxes increase as income increases." Do you agree or disagree? Explain
What will be an ideal response?